- You can’t afford to lose
Cryptocurrency in 2021 is like the internet in 2000: You can live without it now, but you won’t be able to in 10 years (or maybe even sooner). The price calls for Bitcoin have been seen reaching into the millions, so there is definitely a meaningful part of the financial community that does believe this will be the case. Assuming you have the extra money to invest, it might be a worthwhile speculative play.
A 2018 study by Yale University researchers concluded that, based on the risk and return profile of certain cryptocurrencies, a 6% allocation in crypto can help reduce portfolio volatility. The study also showed that the Sharpe ratio (a measure of risk-adjusted return) for cryptocurrencies was actually higher than those of stocks and bonds over similar time periods. And the researchers found that the factors driving crypto performance were entirely different than those of other asset classes as well as those driving other fiat currencies.
- It’s interesting and worth learning about
Regardless of your specific opinion on the future of crypto, it’s pretty difficult to argue that it’s not an amazing phenomenon. The concepts surrounding it, including blockchain and decentralized finance, are emerging ideas that are likely to be core to the way we do business in the future (price projections aside). While it’s probably not a good idea to go all-in on crypto for reasons of diversification, having some skin in the game might lead to more interesting learning on the subject.